Spin-off stocks have been described as one way to find names that will move against a downtrending market, but that doesn’t mean that we can just throw money at them and consistently make money.

Harking back to Gerald Loeb’s admonition that you need a reason and a move before entering a position, yes, stock spin-offs do provide a reason, but the move has to present itself.

Remember that 80% of stocks move along with the overall market. If you are going to enter a situation in which you know that 4 out of 5 stocks are going to follow the trend down, you’d better let the price and volume to come to you.

You can decide when that move is happening in a number of ways and the one you choose is up to you. There are several ways to go, ideally you can find one that makes sense to you and that is clear enough that you can do use it consistently.

Tags: spin-off stocks, trend, Value Investing

Tags: Claymore/Beacon ETF, CSD, spin-off stocks, stock spin-off

The stock spinoff of Myriad Pharmaceutical (whose symbol will be MYRX when the shares are distributed)  from Myriad Genetics, MYGN, is official though it doesn’t really happen until June 30, 2009.

The Salt Lake Tribune explained it . . .  mostly.  Apparently the Securities and Exchange Commission approved the spinoff and the registration is in place,  but shareholders will not receive shares of the new company until June 30th.  In the meantime, very thin trading has been reported for the “when issued” version of the shares that are trading under the ticker symbol MYRXV with them closing their first day at $7.    The “V” denotes when issued.  After the June 30 distribution the symbol will simply be MYRX.

A new company in the sense that it will be completely separate from the parent, Myriad Genetics, for the first time,  Myriad Pharmaceuticals will have the advantage of continuation of leadership. 

This is always an important issue in assessing a spinoff.  To put it bluntly, “Do these guys know what they are getting into?  Do they know what they are doing?” 

In the case of Myriad Pharmaceuticals, the decision of  Adrian Hobdon, PhD,** to head the newly independent company seems to be a very positive sign.    Dr. Hobdon has been with Myriad Pharmaceuticals, Inc. , and hence Myriad Genetics, since October 1998.   Before that he was at Glaxo Wellcome where, over a period of 17 years, he ran a number of departments within the drug discovery area.  Dr. Hobden obtained a BA in 1975 from Cambridge University and a Ph.D. from Leicester University in 1978. 

While no one can forsee the future, that this experienced, successful man has decided to stake his personal future on this new stand-alone entity  is a very positive sign.  He must believe that the chances of the new drugs that are in the pipeline turning out to be successful ones are very good.

That aside however,  since the new pharmaceutical company doesn’t have any FDA approved pharmaceuticals to sell right now, it will be interesting to see what Myriad Genetics shareholders do with the stock they receive in the spinoff.  It could be a classic spinoff price situation setting up.

With all the talk lately of who should spinoff what to get toxic business segments off of their balance sheets, it is encouraging to see a plan come along that may actually take advantage of the strengths potentially found in a spinoff.

**Note that in the original version of this post Dr. Hobdon’s biography was incorrect and is corrected here.

Tags: MYGN, Myriad Genetics, Myriad Pharmaceuticals, MYRX, MYRXV, spin-off stock, spin-off stocks, stock spin-off investing

Whoever chose Hot Trading Secrets as the title for J. Christoph Amberger’s 2006 book definitely knows how to write a title.

Whose interest is not piqued by the offer to be let in on secrets?

When they added that it would tell How to Get In and Out of the Market with Huge Gains in Any Climate I knew that I was going to have to read it, even though I concluded long ago that the reasons many people make much more money than I do has very little to do with secrets.

I have read that a belief that other people achieve what they do and have what they have because they hold secrets, they have connections, they started with money, or they have whatever other unfair advantage you can think of , is often held by people who are depressed.

These beliefs aren’t simply excuses, but have been described as going along with an inability or unwillingness to map out a series of small steps that are most likely to lead on to a particular goal. Help these people not think in blocks, but rather in “bite-sized” pieces, and they are very likely to feel better and become more effective.

So, . . . I vowed to look for the tools, the skills, and the knowledge that Mr. Amberger was going to tell me that I would have to have or gain to be more successful, if he indeed knew.

What I found as I read along was that taken that way he did indeed have some very helpful perspectives and specific tools that I will be able to apply to my own situation; some right away and some over time.

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Given that this is an Agora publication, I knew from the outset that there was going to be lots of good stuff in it, perhaps secrets even, but that it was going to be woven into a great story and a subtle, but powerful, “sell” for something.   And, this turned out to be true.  (I suspect that this book might be at least as valuable for an aspiring copywriter as it is for an aspiring trader, but that need be neither here nor there.)

I found it to be well written, engaging, and quite effective at telling the story of how various component teams and services of the Taipan Group come to many of the trade recommendations that they make to their readers as well a how profitable the best ones have been.   There are a couple of references to “proprietory methods”, but for the most part they seem to have put it all out there.

There are links to Taipan websites and e-letters in the sidebar of each chapter, but the author truly has given enough information that you can do it yourself, or you can subscribe to one or several of the services that use the systems described.

There was enough valuable specific information to justify reading and re-reading this book for me, but probably the most valuable gift was a look into how effective systems are built and developed starting from specific observations about how the markets work.

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Given the focus of this site on spin-off stocks,  I find myself with a better understanding of how important it is to remember  that the observation that spin off companies and their parent companies tend to outperform the general market and their sectors is good,  but that that is only a start.

Now I am looking at finding better ways to decide which spin-offs to enter, when, how, and when to get out.

I have not signed up for any newsletters or services  mentined in the book . . . . yet.

Tags: Agora Publishing, Amberger, book review, Hot Trading Secrets, spin-off stocks, trading, trading plan

Buying spin-off stocks has been found to be an excellent way to outperform the market, but it is not enough to simply find a spin-off and buy it. You have do more things than pick the right stock to be consistently successful.

What you need is a trading plan. Generally speaking, a trading plan includes at least:

• Some conditions that must be met before you do anything else; (usually called the set-up. ) What will be your sign that the time is right for your system to be most successful? For example, you might trade only spin-off stocks and their parent companies, or you might only consider stocks that are making an initial 52 week high, or that have risen a certain percentage on increased volume, or you might only enter positions when the market is trending up or down.
• What will have to occur for you to actually enter a new position. When the climate is right for your system, how are you going to find the best candidates for outsized gains? This might involve a break out of some kind such as rising above recent resistance, or forming a particular chart pattern such as the Wm. O’Neil “cup and handle”, or reporting an earnings surprise, or . . . . .
• The initial stop that will get you out of a trade if it doesn’t go as expected. This is how you protect your capital if you got it all wrong or something happened that you didn’t count on.
• The rules you will follow to make a profitable exit. There is no profit until you get out of the trade. How are you going to know when to get out?
• What size positions will you take and how you will get to that size? How much of your trading capital will you commit to each position? Will you enter in steps, or all at once?

Spin-off stocks are just a set-up, what I’ve been calling the watchlist. Where you go from there with your trading plan involves a number of decisions that you have to base on your capital, your abilities, your temperament, and anything else that you can think of that will affect your ability to carry out the plan without hesitation and without fail.

How you make the best match between yourself and the trading plan is both an art and a science. When it is right, everything else gets much easier.

As often been pointed out, you can’t be certain to win in the markets. All you can do is do what you have to to deserve to win and then live with the uncertainty with respect to gain or loss.

Tags: spin-off stocks, trading plan

Arvin Meritor (ARM) says that it is re-thinking its previously announced stock spin-off of its car parts unit and cutting jobs in light of its projections of future business conditions.

Seems like a sane thing to do given not only the level of current economic slowing down and uncertainty.

Any investing model is based on assumptions about how prices of securities are arrived at.  In times like these when the  rules of the game seem to be in flux,  maybe  to eventually settle down and go on more or less as before or maybe to change significantly, perhaps it is best to stay alert, watch and wait.  This goes for individual companies as well as for us.

The real trick, it seems to me, is to not “go to sleep at the switch” and miss the signs that a new trend is shaping up while trying to not get impulsive.

I believe it was Gerald Loeb who said many years ago that for us investors that it is not just fear and greed that push us into bad decisions, but also impatience.

Staying patient and awake.  That is the challenge now.

Tags: ARM, Arvin Meritor, fear, greed, impatience, spin off, spin-off stocks, stock spin-off